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Explained: FCRA, Foreign Donations, and India's Complicated Relationship with NGOs

Jan 6, 2022 7:32 AM 7 min read

The registration of nearly 6,000 NGOs lapsed under the Foreign Contribution Regulation Act (FCRA) on December 31st 2021, owing to failure to apply for renewal before the due date (5,789 entities) or the Home Ministry rejecting their applications altogether (144).

However, some organisations - like the Indian Medical Association (IMA) - had reportedly applied for a renewal of their FCRA registration but received no communication from GoI before the same lapsed. So the above figures may be in need of revision.

An Ever-Expanding List

Among the organisations whose FCRA licenses are no longer valid are Oxfam India, IIT Delhi, Indira Gandhi National Centre For Arts, Lal Bahadur Shastri Memorial Foundation, Indian Institute Of Public Administration, Jamia Millia Islamia, Medical Council of India, Lady Shri Ram College for Women, Delhi College of Engineering, India Islamic Cultural Centre, Chaitanya Rural Development Society, and India Habitat Centre.

They join the (ever-growing) list of over 20,000 NGOs that have lost their FCRA licenses since 2010. The most notable names among which include Amnesty International, Greenpeace India, European Climate Foundation, and the Gates Foundation-backed Public Health Foundation of India.


Background: India and NGOs

Foreign funding of NGOs is a controversial topic across countries. India is no different.

The political class’s animosity against NGOs has been one of the few matters that have evoked universal support across party lines.

The FCRA regulates foreign funding of India-based organisations. It was passed by a Congress Government in 1976 and its current iteration was enacted in 2010 under the UPA-2 administration. Since then, the legislation has been used as a tool by successive Governments to muzzle NGOs. The Manmohan Singh administration, for instance, used it to crack down on organisations protesting against the Kudankulam nuclear power project and even cancelled the licences of three NGOs over the matter.

Explained: FCRA, Foreign Donations, and India's Complicated Relationship with NGOsHowever, since 2014, New Delhi’s line against NGOs has grown exponentially more hostile. At times, this has bordered on paranoia - Narendra Modi, for example, went on a diatribe in 2016 alleging that there was a conspiracy to “embarrass Modi” and “beat Modi” by NGOs, which he characterised as “diseases” (at an an event that was supposedly meant to be about agricultural reforms).


Pros and Cons

NGOs are often seen as filling the space left vacant by the state and the private sector. They streamline food distribution to the poor, track constitutional developments, draw up suggestions for Parliamentary reforms, provide sanitary napkins in slums, open schools in far-flung hamlets, ensure basic healthcare in rural areas etc.

In India, NGOs have been at the forefront of several landmark feats, including the RTI Act, MGNREGA and the Food Security Act. They also deserve all appreciation for helping stranded and starving migrant workers during the nationwide lockdown in 2020 - those aren't our words, those are the Supreme Court's.

That said, you’ll find few people who say the NGO landscape was ever not in need of reform or regulation.

As of 2017, there were 32.97 lakh registered NGOs and voluntary organisations in the country. That translated to one NGO for 400 citizens: an abysmally high number and less than 10% of which had actually filed their audited accounts.

Why these bloated figures? Because many NGOs exist only paper, conjured by shady individuals to launder money and collect funds that are meant for supposedly humanitarian purposes but would just end up going into the pockets of the promoters. Call them "briefcase NGOs".

FYI: Presently, after the recent subtractions, there are 16,829 FCRA-registered NGOs in the country.


How Not To Solve A Problem

The non-profit segment, therefore, needed reasonable regulations to weed out the bad players and enable the real ones to function well. However, the policy response to NGO reform has been asymmetrical, heavy-handed, and mind-numbingly hypocritical.

Explained: FCRA, Foreign Donations, and India's Complicated Relationship with NGOsLet’s understand how by looking at the 2020 amendments to the FCRA. They elicited widespread condemnation from civil society leaders and (just like virtually all legislations under NDA-1 and especially NDA-2) were passed within only a couple of days after their introduction in Parliament.

Three changes were particularly controversial.

The first pertained to requiring NGOs under FCRA to open a bank account in a New Delhi-based SBI branch (even though only 7% of NGOs in India are Delhi-based). The second banned the practice of one NGO transferring foreign funds to others (even though NGOs typically function in an umbrella manner, with larger ones supporting smaller organisations, since the latter typically don't have the resources to court foreign donors). And third, the cap on administrative expenses by NGO was lowered from 50% to 20% (this means NGOs can only earmark a fifth of capital to things like rent, salaries, legal fees, transportation etc. - things that actually claim the bulk of their expenses).

The widespread view was that these amendments - along with many other policy actions that have accompanied it - were geared towards increasing compliance costs, giving authorities more reasons to cancel FCRA licenses, and driving NGOs out of business.


Action and Reaction

Okay, then why don’t NGOs just challenge the supposedly crippling amendments in court or start a popular movement against them?

The first is a taxing ordeal not only because the judicial process can be a long and gruelling one, but also because of fear of state retribution. Look at what happened to the Indian Social Action Forum (INSAF). It took GoI to court over the 2010 amendments, saying the facet about disqualifying “any organisation of a political nature” was vague, arbitrary and liable to misuse.

The case itself dragged on for a decade, but during this period, the organisation had to endure the worst of State wrath and bureaucratic excess. In 2013, INSAF's registration was suspended by the Home Ministry “in public interest” (the suspension was duly quashed by the Delhi High Court) and in 2016 its FCRA registration was not renewed, without any reason being given.

In March 2020, the court ruled largely in favour of INSAF’s arguments against the 2010 amendment. But fighting the case meant the NGO had to endure years of State harassment and fast-depleting funds as benefactors abandoned it. After all, foreign donors would think twice before funding an entity that has gotten itself on the wrong side of the Union Government.

Such a fate would likely await any organisation that seeks to take on the might of GoI. It's asymmetric warfare. Like David and Goliath, but if David was not allowed to use a slingshot and Goliath had an army of well-paid lawyers and red tape-spewing bureaucrats behind him.

As for the second suggestion regarding simply spreading more awareness and eliciting public support towards NGOs' cause, that is easier said than done. "Unfair FCRA license renewal delays" isn't a very sexy rallying cry, and foreign funding of Indian organisations, as we've noted earlier, is a very, very touchy topic.


Why the Animosity, Though?

It's easy to see why the State would dislike NGOs. By claiming to do politicians' jobs for them, they show politicians in a poor light. Many, like the Association for Democratic Reforms, publish critical data regarding MPs' wealth, land holdings, legislative history, criminal cases etc. Others, like the IMA, did invaluable work during the Second Wave in 2021. Or Oxfam India, which has been helping set up oxygen plants across the country even as the Third Wave rises (which becomes all the more important when the Government itself says nobody died of an oxygen shortage last year).

For the average citizen, foreign funding of NGOs may very well be a prestige issue, a matter of shame, embarrassment or denial that the country still needs foreign money to provide its citizens with basic services over seven decades after independence.

This skeptical tone in public perception was always present but it has noticeably soured over the past two decades. Three main reasons that may explain this shift: (1) a more hardline and confrontational stance by NGOs themselves (particularly since the Narmada Bachao andolan), (2) a popular perception that NGOs' leaders are leftist or sympathetic towards leftist parties, and (3) the continuous effort by politicians to discredit them.


The Art of Having Two Faces

Amusingly, one of the most common arguments made against foreign funding of NGOs is that it may be used for questionable or "anti-national" activities and that stricter FCRA provisions are necessary for financial transparency.

Which is fair - you can't have illegal money funding possibly illegal activities.

What's amusing, however, is that the people in power who go on rants about the importance of financial transparency are the same ones who hastily amended the election law in 2017 to allow the unlimited, untraceable and unquestionable purchase of electoral bonds. The issue of electoral bonds has led to a deluge of unaccounted-for money in our political system. And it's too complicated to delve into now (but here's a primer), but the point is that elected governments can't foster a culture of restrictions-for-you-and-none-for-me (especially when it's knee-capping-restrictions-for-you-and-a-free-pass-for-me).

A more amusing fact: The same people who enabled opaque electoral bonds while demanding transparent foreign funding used the same FCRA route to whitewash their own lawbreaking antics. A 2014 Delhi HC verdict came down heavily on BJP and Congress for illegally accepting foreign donations even though FCRA explicitly prohibited them from doing the same. In response, our leaders simply reworded FCRA to give themselves a clean-chit.

And while we're at it, yet another amusing fact: An organisation can be denied an FCRA renewal if any of its office bearers has "any prosecution under any offense pending" against them. Which might seem reasonable were it not for the fact that the parties demanding these standards are the same ones that allow people with literal robbery, rape and hate speech cases against them to not only contest elections but also to serve in legislatures.

Hypocrisy, thy name is Indian politics.


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